Q1 2026 Houlihan Lokey Inc Earnings Call
Good day, ladies and gentlemen. Thank you for standing by and welcome to the Houlihan Lokey Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode.
A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today 29th of July 2025
I will now turn the call over to the company. Please go ahead.
Thank you, operator. And hello, everyone. By now, everyone should have access to our first quarter fiscal year 2026 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the Investor Relations section.
Today will include forward-looking statements.
These forward-looking statements, which are usually identified by use of words such as "will," "expect," "anticipate," "should," or other similar phrases, are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect; therefore, you should exercise caution when interpreting and relying on them.
We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
We encourage investors to review our regulatory filings, including the form 10q for the quarter ended, June 30th 2025 when it is filed with the SEC. During today's call, we will discuss non-gaap Financial measures which we believe can be useful in evaluating the company's financial performance.
These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with gaap.
A Reconciliation of these measures to the most directly comparable. Gaap measures is available in our earnings release and our investor presentation on the eggshells Comm website. Hosting the call today, we have Scott addleton hoolahan, Loki's chief executive officer and Lindsay, Ally Chief Financial Officer.
They will provide some opening remarks and then we will open the line to questions.
With that, I'll turn the call over to Scott.
Thank you. Christopher, welcome everyone to our first quarter fiscal year 2026 earnings call.
We ended the quarter with revenues of 605 million and adjusted earnings per share of $2.14.
Revenues were up 18%, and adjusted earnings per share were up 75% compared to the same quarter last year.
We began fiscal 2026 with momentum and concluded the quarter with solid performance across all three of our business lines.
Our views of current market conditions and our business are broadly consistent with what we shared last quarter.
While market forecasts remain difficult given a dynamic and volatile macro environment, we continue to see the benefits of our diversified business model, particularly across industry and geography.
The markets in which we operate are showing resilience adapting to the complexities and uncertainties of the current environment.
Turning to our results. Corporate Finance produced $399 million of revenue in the first quarter, a 21% increase over last year's first quarter.
Key metrics for our corporate finance business including transaction size and average fee per transaction, continue to see steady Improvement. This was achieved despite muted activity from the financial sponsor, Community underscoring, the strength of our business, which we believe should pick up as sponsor activity, eventually returns to more historic levels.
We are cautiously optimistic that this momentum will continue through fiscal 2026, while we remain mindful of the potential headwinds, including tariffs and inflation.
Our financial restructuring business produced $128 million in revenues for the first quarter, a 9% increase over last year's first quarter. Financial restructuring activity remains elevated, supported by persistently higher interest rates.
Macro uncertainty and over-leverage companies.
Revenues in financial restructuring are diversified across industry and geography, and we are experiencing a balanced mix of debtor and creditor work. We expect to continue to see elevated restructuring revenues throughout fiscal 2026.
Financial evaluation advisory produced 79 million in revenues for the first quarter, a 16% increase versus the first quarter last year.
FBA had a very strong first quarter with continued growth in its non-cyclical service lines, while its pro-cyclical businesses benefited from improving M&A market conditions.
Particularly in the US.
Our outlook for FBA is similar to our outlook for CF as we expect to see continued year-over-year growth throughout the remainder of the fiscal year.
Strong hiring market for senior Talent.
Drawn to our global platform and track record of growth.
Our pipeline of acquisition opportunities remains robust.
And we are confident that the combination of our organic hires and strategic acquisitions will continue to help us expand our workforce across industry, service line, and geography.
On the marketing front, I'm very proud to announce that we hosted the inaugural Houlihan Lokey, Inc. conference in New York, dubbed the Woodstock of deal-making by Bloomberg. This major event showcased our one-firm approach and global scope.
With more than 4,000 people in attendance and approximately 400 companies participating.
We are thrilled with the feedback we received from clients who attended and were proud of the experience that we are curating for our clients and Prospects around the world.
We remain confident in our outlook, for our fiscal year 2026, despite volatility in global markets, companies appear, to be adapting to the realities of decision-making in this environment, with our Global reach sex or depth and balance. Business model, we continue to be well positioned to help our clients, navigate the environment and capitalize on new opportunities.
Lindsay over to you.
Thank you, Scott.
Revenues and corporate finance with 399 million for the quarter up 21% compared to the same quarter last year. We closed 125 transactions. This quarter up from 116 in the same period last year and our average transaction fee was higher for the quarter versus the same quarter last year.
Revenues and activity levels, in the US continued to outpace those in Amia. And we expect this Regional Dynamic to persist through the summer.
Financial restructuring revenues were $128 million for the quarter, representing a 9% increase compared to the same period last year. We closed 35 transactions this quarter, compared to 33 in the same quarter last year, and our average transaction fee on closed deals increased.
For financial evaluation, advisory revenues were $79 million for the quarter, reflecting a 16% increase from the same period last year. We had 957 fee events during the quarter, compared to 847 in the same period last year, which represents a 13% increase.
Turning to expenses are adjusted compensation. Expenses were 372 million for the quarter versus 316 million for the same period last year. Our only adjustment was 21 million for deferred retention payments related to certain acquisitions.
Our adjusted compensation expense ratio for the first quarter in both fiscal 2026 and 2025 was 61.5%.
We expect to maintain our long-term target of 61.5% for adjusted compensation expense ratio for the balance of the year.
Our adjusted non-compensation expenses increased to 94 million for the quarter compared to 80 million for the same period last year. Our adjusted non compensation expense ratio for the first quarter and both fiscal 2026. And 2025 was 15.6%.
On a per employee basis, adjusted non-compensation expense for the quarter increased to $35,000, compared to $31,000 for the same quarter last year.
The increase was primarily driven by our Hoola and Loki 1 conference, which combined six Legacy conferences, spread throughout the year in the U.S., into a single flagship conference. Excluding the cost of this event, non-compensation expense growth would generally have been in line with historical trends.
For the quarter, we adjusted out of our non-compensation. Expenses. 9.5 million in non-cash acquisition related amortization.
Approximately $900,000 pertains to professional fees associated with streamlining our global organizational structure, referred to as Project Solo, and approximately $18 million is related to the increase in value of acquisition contingent consideration.
We have always treated all acquisition contingent consideration as purchase price and adjust any significant changes to the value of such contingent consideration out of our p&l.
Historically, the effects of the revaluation of acquisition contingent consideration occurred in other income and expense.
Starting in fiscal 2026. We are including the effects of the revaluation of acquisition contingent consideration and non-compensation expense as a separate line item.
As a result, any adjustments to this line item will occur in non-compensation expense going forward.
Approximately 5 million in the same period last year, the Improvement was primarily due to an increase in interest and other income generated by our investment securities.
Our adjusted effective tax rate for the quarter was negative 0.8% compared to 31.2% for the same quarter last year.
The decrease is due to a policy change which we discussed in last quarter's remarks. We are no longer including the impact of stock-based compensation vesting on our adjusted effective tax rate.
This year. And for the last several years stock testing has had a positive impact on our Gap effective tax rate for both the quarter and the year and we have adjusted out that benefit.
Without the adjustment in q1 of fiscal 2025, our adjusted effective tax rate would have been 9.3% for the first quarter.
Given the significant impact from stock busting, we expect to see our fiscal 2026 full year. Adjusted effective tax rate between 25 and 26%.
Without the adjustment for stock vesting, in fiscal year 2025, our adjusted effective tax rate for last year, would have been 26%.
For the first quarter of fiscal 2026, we adjusted our effective tax rate to exclude the effects of acquisition-related non-deductible expenses.
Turning to the balance sheet, we ended the quarter with approximately $867 million of unrestricted cash and investment securities.
For cash position, declined. This quarter as we paid a significant portion of our fiscal 2025 bonuses to employees in May
Also, in our first quarter, we issued approximately 1.1 million shares to employees as part of our fiscal 2025 year in compensation. We repurchased, through withholding cover, approximately 800,000 shares during the month of May. With that, operator, we can open the line for questions.
Thank you, if you wish to ask the question.
1. On your telephone keypad, if you wish to cancel your request, please press star 2. And if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Devin Ryan from Citizens. Please go ahead.
Great. Uh, hi Scott. Hi Lindsay. How are you?
Yeah.
Uh, so I heard the comment, uh, prepared remarks that your views to the business are broadly consistent, uh, with last quarter. And, and so, I'm just curious as it relates to corporate finance. And, you know, I would assume that there's been some market improvement just with sentiment, um, you know, improving and more optimism, um, in the market more broadly. It's interesting.
Curious, if you're seeing that with clients where you were 3 months ago, uh and maybe through most of you you already started to see that re acceleration in momentum but just want to dig in there a bit more and then just if you can just hit on kind of how that logs and trended kind of um inspectors going to move forward um on auctions and and transactions. Um and then from a sector perspective as well, if you can touch on that. Thanks.
Really bad connection. So I will try and do my best with that. But I, I, I think that what we've been saying for a long time is, is that it keeps getting better quarter by quarter but not necessarily month by month. So, even within this quarter, you saw the momentum shift if you will a bit back and forth. And that's some of the uncertainty we see in the marketplace, having said that, as I said in my remarks, I mean, the resiliency of our clients to really adjust to the market where and continues to get better and better and I think that is what we're feeling. It is getting better and better to order by quarter, but not necessarily month by month
Okay. Thanks. Apologies for the second part of the question, but honestly, it was backlog, I think. But you're breaking up so bad. I wasn't really sure if you wanted to try and repeat it. I'll give it a shot. Yeah. If I'm not going through, I'll hop back in the queue. But essentially, I just wanted to give a little bit of a sense of how the backlog is refilling and then if there are sectors that are snapping back faster, and if there are any areas that, of course, are still impacted by tariffs or other.
Quarter versus last quarter versus the same time last year. Um, in terms of background,
Got it. Okay. I'll leave it there. But thank you, guys.
Thank you. Your next question comes from Brendan O'Brien from Wolfe research. Please go ahead.
Good afternoon, and thanks for taking my questions. Um, you know, to start I just want to touch or follow up on Devon's question a bit. You know, within Corporate Finance, the top-line trends continue to look very strong, but your growth and the number of deals completed has seemed to decelerate a bit. So, I just want to get a sense of the breadth of activity that you're seeing in the market today, specifically around the quality of assets that you're seeing move, and when we can start to see that aperture widen.
And yeah, I mean, I, again, have the same commentary about getting.
Better at kind of quarter by quarter, right? It is. It's back what we've talked about before. What's the slope of that Improvement but we clearly are in a good environment at this point, but again, it kind of the bottom end of it is what I would say the in, in terms of volume of deals, I do think after Labor Day after, you know, we're going to see that uh, even pick up more. That's certainly, is the indication from everything we're seeing.
And look, I'd say from a deceleration standpoint, we had an extraordinary quarter 1 last year, I think our corporate finance revenues grew 44% or so. I mean, 21% growth is decelerating versus the same time last year but it's still pretty strong and it's over a much larger base. And so I, I mean we don't, you know, we we don't see a decelerating trend at all. We're just operating off of a higher base this year versus the same time last year.
Totally appreciate that. Um, and I guess for my follow-up, I just want to clarify some of your comments around the non-com side. Um, you know, specifically, I know you got it to the high single digit on comp growth rate, last quarter. Um, is that still your expectation for the full year this year or, you know, has something changed, whether it's travel or inflation or anything like that?
No, we're we're still at that high single digits. Unfortunately, we just had our entire non-comp expense on our first quarter. Um, I'm joking about that, but but we did, you know, we had a higher first quarter. I think there was a specific reason why. Um, but we do expect to see kind of that still that high single digits for the, for the balance of the year. And now part of that is driven by headcount growth as you know. Um, So the faster, our headcount grow grows this year, the higher our non-comp expense, um, and and so some of it is beyond our control and some of it is a good problem to have. But as we as we sit here today, no change from last quarter, in terms of what the
Of the year looks like.
Great. Thank you for taking my questions.
Pleasure.
Thank you. Your next question comes from James grow from Goldman Sachs. Please go ahead.
Uh, good afternoon, and thanks for taking the question. Um, Scott.
Hey guys. Um
Structure remained elevated this quarter, uh, I I know you gave the outlook for the business as being elevated, but maybe you could just dig down a little bit into, uh, anything that you are seeing around liability management versus chapter 11, traditional restructuring. Um, and, and then, you know, expectations for the forward, for each of those
Yeah, I mean, I think it's consistent again, we kind of think about it. It's important and out of court, if you will, but the it, it continues to be active on both sides with obviously some of the not as large transactions, leaning more towards the out of court. Um, and but there are does seem to be a good pipeline kind of across the board. Um, and we're seeing it,
It continues to be a strong restructuring environment. Environments are certainly elevated.
And James, our commentary for restructuring hasn't really changed much. I mean, we don't we consider liability management for this small restructuring. Um, so we don't really differentiate it. Uh, and and look, the market has been and think we will continue, will continue to be reasonably strong for liability management transactions. Um, given that we've just had a really long Runway. And, uh, and we don't see that changing through certainly through fiscal 26, which is why we you see a, you hear a little bit of confidence in terms of elevated restructuring for the balance of the year.
That's great. Uh, Scott.
Color around the, the growth of your secondaries business since, uh, you you did the the deal. Um, and then, I guess, any, uh, thoughts, uh, around, uh, the cyclical versus, um, structural drivers and perhaps your, uh, your expectations for, um, how much, or or how much growth that that business could have over time.
Yeah, I I think that we're very happy with that with that is now all involved within our Capital Solutions Group which as you know, is, is part of corporate finance. And that integrated approach seems to be serving us very well. And we're we're extremely happy with um, many parts of that. The even on the primary side, we see that picking up, but certainly on the secondary side that GP Stakes, so please Stakes that, that whole piece is and directs is something that we're really seeing the benefit of them coming on to our platform and not just in terms of results. But also in terms of thinking about the business differently and how it can even scale much larger than I think, maybe people thought it, it could have been feeling really good about it.
Great, a lot more to come.
Perfect. Uh, and then one quick ticky-tacky one for you, Lindsay. I just want to clarify a previous point. So, uh, your commentary is that the growth of non-comp dollars for the fiscal year is still expected to be in the high single digits range year on year. Is that correct?
Yep. Uh yes. That's correct.
Thank you so much.
Of course, of course.
Thank you. Your next question comes from Alex bond from KBW. Please go ahead.
Hey, good afternoon everyone. Um, just wanted to maybe drill down on the, the sponsor side of the market currently. Um, and I know, um, you know, referenced earlier that, you know, the post Labor Day, um, Market is shaping up, you know, expecting to see an increase there, but um, kind of across the market more broadly. But I'm wondering if that is, you know, consistent with what you're seeing, um, in terms of, um, in the sponsor Market as well, um, and then, especially just giving, you know, some of the recent market tail ones that we've had. Um, so yeah, I guess just summarizing, you know, would you would you expect to see, you know, an increase in, um, sponsor activity, kind of after that Labor day, period or could I, you know, a more broader um, resumption and sponsor activity? Maybe take a little bit longer than that, any caller there would be great. Thanks.
Yeah, I I think that it's it's consistent spot. The sponsor activity has been muted? No, no doubt about that. And I think that's 1 of the reasons. We're pretty happy with where things are given the muted level of activity, sponsors at the moment, but I, we certainly have seen it continue to pick up again. It is continuing to pick up and we do expect it to pick. Pick up even more based upon dialogues that we're having right now and Labor Day for sponsors. Happens to be a nice inflection point to go to market. And so yes, it different than strategic. They, they tend to operate, um, a bit more with the seasons. Um, just given summer and vacation.
Got it. Okay, that's helpful. Um and then maybe just as a as a quick follow-up. I know you mentioned that um you know, you continue to expect the uh the US markets, kind of outpace. The AMA region just from an m&a perspective. But um, curious if you know, if you can maybe just drill down a little bit more there and, you know, maybe any trends that you're seeing that are differing there or or is, you know, um, or are you expecting to see, you know, a broader recovery in, in volumes, um, in Europe as well. Um, but maybe just, you know, stronger in the US just any any color, that would be great as well.
Yeah, I think that our history is that they don't move tend to move, um, in exact Unison. And I can tell you that when things started to turn down the number of quarters ago, the, uh, Amia was slower to turn down than the US and I think that this is just a cycle time, it's just coming. Coming out slightly slower, it's not this is not dramatic.
Differences.
Got it, understood. That's helpful. Thank you, guys.
Thank you.
Thank you. Your next question comes from Ryan. Kenny from Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question.
Yeah, I think just by our nature, we're, we're measured number 1. Number number 2 is really that we have are living in an, in an environment that has demonstrated a degree of uncertainty and, and volatility. And so that causes us to be measured in those statements. Having said that, if things continue on the way they are, at the moment feel very good about it, but it, it just, it recognition that we are living in more volatile times at the moment.
Thank you.
Pleasure.
Thank you.
Your next question comes from Jim Mitchell from Seaport Global Securities. Please go ahead.
Hey, good afternoon. Scott, you talked about the acquisition environment still being robust and the pipeline being good. But, you know, as the environment picks up, does it get a little tougher to close the deals, or do you still think that, regardless of the environment, there's still a lot of opportunity to consolidate?
The, that a that at least based upon our history, that has not been a particularly strong indicator. And actually, if anything, it tends to work the other way. When things get really tough, people don't want to do deals. And so it doesn't change my view at all.
Okay. Um, and then just to follow up on restructuring, I hear you. Right now, the environment is still pretty good, but I guess based on your history and cyclicality, do you see if the Fed's cutting rates, we get through these tariffs, the economic environments does better, does that business flow? Or is it just different because of the liability management environment? And, you know, there's still plenty of room to kind of grow that piece of the puzzle.
I think, 3 years ago, we would have told you, yes, we would expect to see restructuring, you know, decline as m&a started to pick up and and, and that had happened, many times in the past for us, you know, look it in this environment. Restructuring has shown real resilience and I think there are a whole bunch of factors, um, for that resil, that lead to that resilience. And so, yeah, I don't, I don't want to sound too optimistic. But look, this may be the new trial for restructuring, it, you know, and and when we see interest rates come down a little bit, which I think most people expect over time if we see an improving economy with less, uh, volatility in the macro environment. I mean, shoot, we may see restructuring revenues, kind of where they are today and, and, and waiting for the next cycle. So it it we've stopped kind of guessing what the trough might look like for restructuring based on just how well it's performed over the last couple years, right? So so Peak is the neutral.
Yeah, exactly. Okay, if the interest rates go back to zero, yeah, yeah, yeah. Right. I mean, normal guys. Yeah, that makes sense. Thank you.
Thank you. Once again, if you do wish to ask a question, please press *1. Your next question comes from Ken Wellington from J.P. Morgan. Please go ahead.
Good afternoon. This is Moline, delighted to be on for Q1 2026. Thanks for taking our question.
Um, you mentioned a strong and MD, you mentioned a strong MD hiring environment and your prepared remarks um and I think you've mentioned it in previous quarters as well but we've been noticing your md. Headcount growth has been significantly outpacing. Overall headcount growth for about the last 12 months.
Um, is this a cognizant choice on your end to concentrate talent at more senior levels, or maybe even consolidating junior talent or administrative roles? Or is this more just reflecting the opportunistic hiring that you're pursuing?
I, I think that we are always looking for talent that is, that is part of our business model, and we are very fortunate that given the success in our growth and the resilience of our business model, we've been able to continue to attract really, uh, fantastic talent, and so, and that's really all over the world and across our product lines. And we're, we're going to stay committed to that.
But I don't think that there's no there's no structural design that says we're growing senior talent and slowing down, junior Talent growth. It it just it just probably happens stance in the in the in the numbers my guess is we will revert back to kind of the structure that we've historically had. It just may be that the the numbers aren't suggesting that right now.
Okay, great. Thank you. And are there any particular businesses or or sectors? You're focusing on for for future hiring?
Growth, and we are always looking for great people.
That we think is a strong cultural fit.
Thank you so much.
Thank you very much pleasure.
Thank you very much for the question at this time. I'll now hand it back over to the company for closing remarks.
I want to thank you all for participating in our first quarter fiscal year 2026 earnings call. We look forward to updating everyone on our progress when we discuss our second quarter results for fiscal year 2026 this fall.
And that does it for our conference for today. Thank you for participating. You may now disconnect.